Hurrah for the new ‘Golden Era’ of Agency recruitment !

Hardly a week goes by without some ‘expert’ trumpeting the death of agency recruitment, or a technology start-up predicting the ‘disruption’ of our industry, and how recruiters are an endangered species.

Really? Who exactly? And, when exactly? Didn’t LinkedIn promise that, what, a decade ago? We are still here. Growing in fact.

Agency recruitment is not a dying industry.

In fact, despite what you read, our prospects have never been better! We must re-invent and evolve, for sure, but where we are going, if we get it right, is a far richer, more intellectually stimulating future than anything we have seen before.

The opportunity for companies to grow and make profits has never been better. The opportunity for individual recruiters to make money and forge fulfilling careers is back on the table.

But, not for everyone.

In fact most will not ride this new wave of prosperity and fun.

It’s an opportunity, not a right. The smart, and the quick to adapt will thrive. The rest, not so much.

But, why do I believe Agency recruiters have the world at their feet, if they make the right strategic and tactical decisions?

This,

1: The frailties of in-house recruiters.

For years now we have been running scared because of the rise of in-house recruiters. And hardly a week goes by without some head of internal recruitment trumpeting how they have reduced agency spend. And that reduction is no doubt true, and felt by many of us.

But, increasingly the evidence is that all is not so rosy in the in-house world. Reducing agency spend is one thing. But what about key metrics like ‘quality of hire’. Line managers are reporting a drop in quality of candidate, and that is holding business back.

And what about ‘time to hire‘? The internal team saves an agency fee, but it took them six months to fill the job? What was the cost to the business, of that delay?

And then, what about your employer brand if your processes provide a horrific candidate experience, which many corporates do. What does that cost? In money, in future candidates, and in customers?

There is no doubt that we are seeing a shift back to clients realising that the time and infrastructure required to recruit high quality people, at short notice, does in fact need agency expertise.

So the effectiveness of in-house is being tested. And will come under the microscope even more as talent shortages start to effect corporate results.

So, I believe that one of the biggest barriers to Agency growth — in-house teams — will become less of a threat. But only if we are able to provide our clients something they cannot get themselves.

We have to do, what in-house cannot do. And that is mostly to do with accessing specialist talent.

2: Technology recruitment solutions are not so scary.

Technology recruitment solutions have been popping up almost weekly it seems, all claiming to be able to wipe out agency recruiters.

Many have come and gone already. Others, like LinkedIn, pose a much more credible threat.

But none of them, LinkedIn included, has come close to wiping out third-party recruiters. And bear in mind LinkedIn has been around 12 years. Longer than most of you reading this have been in recruitment! LinkedIn is not a start-up, deserving of time, to ‘get it right’. In fact, frankly, LinkedIn have as many issues to address about their business model as recruitment agencies do. More maybe.

And our industry has not suffered since LinkedIn came along. In fact our industry just grows and grows, (The global staffing industry is worth USD $440 Billion and growing at more than 5% a year. The US temp staffing numbers have just hit an all-time high, with 2.9 million temporary workers placed through agencies, every day. The Australian recruitment industry is worth USD 21 Billion.)

And many of the digital, technology driven recruitment disrupters, who started with a hiss and a roar, while no doubt carving a niche in some cases, are clearly no significant threat to our model.

Don’t get me wrong. I am not dismissing the impact of technology on our industry, and on Agency recruiters. I call these companies ‘Hi Tech/No Touch’ recruitment matching models, and they will take some business, mostly low level, but in my view they will do our broader industry zero real harm.

Identifying candidates is not the same as recruiting them. It’s the ability to bring talent to the hiring table, and manage the process that clients will pay us for.

And that leads me to the core reason why our industry is approaching it’s best ever era.

3) Massive, global, skills shortages

Sustained, epidemic shortages of skills and talent required to do the jobs, many newly created, that society needs.

Skills shortages are already upon us, and they will get far, far worse. And skills shortages are nirvana for us. If we become world champions at finding talent!

There are endless stats on this topic, but suffice to say more than 50 percent of global employers are currently reporting talent shortages. And crucially, they say the shortages significantly impact their ability to meet their client needs.

Each industry and sector already has a list of niche skills that are in short supply, and this will intensify over the years ahead.

And the impact is being felt right now.

Just last month SEEK in Australia reported a 10% rise in job ads year on year, in the very same week that unemployment in Australia hit 6.4%, a 13 year high!

Meanwhile ITCRA reports that the time it takes to fill IT contractor roles doubled in the last three months of 2014, as the search for quality contractors intensifies.

And this costs companies money. And this is only beginning.

Talent becomes the epicenter of competitive advantage

In fact talent is now the new currency of wealth creation. It is what makes companies win or lose in the market, and it’s what will make entrepreneurs rich. Or not.

It’s a differentiator. It’s non-negotiable. You must hire the skills. And that ladies and gentlemen… means Agency recruiters are back!

Skills shortages and the currency of talent alone means huge opportunities for third party recruiters.

4: Changing candidate job search behaviour.

On top of this, technology has changed the way candidates look for jobs. They have literally dozens of channels including job boards, company career sites, social media, and increasingly, search engine job searches.

So the best talent will know their worth. And they will also know how complex the job search has become, how time consuming. What an invasion of privacy it can be. And if Agencies are good enough to provide this option, they will come to us because we can act as their Agent

5: Old candidate tactics no longer working.

It’s now crystal clear that many of the standard talent sourcing channels, that most corporates use, are becoming increasingly ineffective.

Job Boards are still a major source of hire. Don’t get me wrong on that. But they only tap into a very active group of job seekers, and more importantly job seekers are getting sick of them, favouring new ways to connect with new jobs.

LinkedIn is waning in effectiveness in my view. In many ways LinkedIn has actually weakened the efficiency of the recruitment function. It’s now more difficult to connect with qualified talent, because LinkedIn has made data so available, the best candidates get swamped, and they get approached in such an untargeted way.

Technology can help you identify talent. But human beings recruit!

The recent decision by LinkedIn to limit Inmails is clearly in response to many of it’s members being inundated with recruiter spam. Many of the most qualified individuals are actually going out of their way to make themselves harder to find! There is now perceived to be an advantage in privacy.

And in my view 2015 marks the beginning of an era where we return to ‘the relationship’. ‘All-digital recruitment’ does not work.

6: Power is shifting to the candidate

The fact is power is shifting to the candidate, and if it hasn’t in your sector yet, it no doubt will do. And in a candidate driven market place, waiting for them to respond, simply does not work. It changes everything. Relationship building and candidate experience become key.

We think all of this is a problem for us Agencies. But it’s a massive problem for companies who want to hire direct. Their old strategies are not working too. So what are they going to do now? Well, they will look for outside help. And we need to be ready. Match fit. Primed to respond.

And that means one thing.

Recruitment companies have to become world champions at finding unique talent. We have to create candidates. We have to be skills hunters and talent magnets.

And that is going to take a change in mind set for many of us. We have to be innovative and sophisticated in developing a wide variety of tactics to drive candidates into our talent funnel.

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18 Comments

Hi Greg, well, you know my views on the industry, and I'm probably one of the folks who point out where it is going wrong...actually I know I am! However I do that because I see where it is heading and I want it to change that path. I love the industry and don't want to see it falter. Rec needs to 're-invent and evolve', most definitely, but how long will it take to do that? When we see the larger firms miss growth / revenue targets on a more-than-once basis and even worse, collapse, is it because they do not innovate? Do not adjust to the new paradigms of candidate-empowerment or just don't see that old methods will not cut it? I am not convinced that a lot of rec firms are heeding this message.
To your other points, I am really happy to see more emphasis on human hiring. This is an awesome thing to see emerge and whilst technology is a brilliant tool to aid it, as you say it should not be the crutch to lean on. Speaking of tech, I am also of the view that LI has lost it's edge. It is now a B2B sales tool, with it being overrun with far too much salesy content, losing it's sense of it being a tool to inform, educate and network. It cannot, nor should it, be relied upon as an effective recruitment tool and the only tool in one's recruitment arsenal.
Nice article...but you won't mind if we still cast that critical eye over the industry to push it into the improvements and subsequent growth it deserves, will you? :)

Scott, there are few people on Gods green earth more critical of the recruitment industry than me. Read this my blog from beginning to end to see that. But I am also aware of it's many virtues and the great people within in it. Balance is the key. Right now, our industry has many faults..but as I have said here, a great deal to offer

Hi Greg,
As an outsider to your industry, I applaud a return to people focused recruitment. I hope it comes in full force.
Despite delivering major success as CEO of a national company plus subsequent high level results in advocacy, I have not been granted a single formal interview even though I have applied for around 300 jobs.
My sense is that recruitment has become tick box oriented and software driven. Real talent gets filtered out on the omission of a single criterion. This is a major negative for all three parties.
In my opinion based on the experience I have had, most recruiters are incapable of recognising talent unless resumes and cover letters get through the raft of lowest-common-denominator filters placed in their way.
Recruitment is broken except for the most obvious match-ups between applicants and employers...and employers can do that for themselves. I did.

Hi Greg,
As always your article was a good read.
I will add a couple of points that may be food for thought.
Every body with an opinion wants to have a go at the recruitment business. It is as if every profession out there is operating in the most efficient, smartest and honest possible way and it is only the recruiters that are bad and need to evolve. I have learned to tune out over time.
What I have noticed in the past 9 years or so, and this is purely my personal experience, is that there are really two types of customers out there.
There are managers and HR departments that are genuinely interested to perform well for their company. They proactively involve themselves and care who joins their teams and companies. When it comes to recruitment, they are selective but open to recruiters who have the right relationships and the evidence to back up their work. In other words they pick recruiters who can be partners and add value to their end goal. Instead of wasting time resisting the recruitment industry, they spend the same time to find and partner with good recruiters. In my experience, they have been the people (both at HR and management capacity) who have led successful careers and have added value to all companies that they ever worked for.
The second type (which again exists both at management and HR capacity), is the careless type. Their motto is "how easy can I turn a paycheck and go home at the end of the day". They do very little that is productive and (while they will never admit this) they could care less who joined their team or their company as long as they didn't have to do much work. They are the ones that are usually bitter and spend most of their day bickering about how recruiters are cowboys while you could probably spot at least one or two recruitment agencies on their PSA (gotta love the PSA) who give the real cowboys a run for their money.
You could sit all day and give the most logical reasoning to the second group. You could be the best recruiter that walked the earth and they could care less if it meant they had to step outside their comfort zone.
There is no denial that recruitment as a whole can get better and we should. But I don't believe that the problem solely exists amongst the recruiters.

That is where recruiters can and must get selective about which customers get to work with them.
Not all that glitters is gold.
Some customers are an unimaginably waste of time and should be left to the competition. The good ones, those with whom you can work as an equal partner, are worth their weight in gold and should be looked after very carefully.
I am amazed (and grateful) that so many recruiters aren't at all picky and are perfectly willing to work on jobs of diabolical quality.

Another well crafted piece supported by some well presented additional comments - thanks Greg.
I particularly relate to Navid's observations in relation to the two distinct types of 'customers' we find ourselves trying to engage with.
Being focused on doing 'good work with good people', and discriminating accordingly, has generally served me well over the past 20 years.

Superbly put together. To the point and a honest statement.
For years my very first boss said that the industry can only get better.
Recruitment profession has history dating from 1895 the first agency in London Mrs. Hunt agency.
Today the Hunt family I believe are still in recruitment.
If only we were supported and trusted more by the minority of doublfuls we would be even more stronger and successful.
We will be getting even more stronger and better in the future.
Mrs Hunts agency use to recruit and supply personnel in the "Upstairs and Downstairs" profession, butlers, maids, cooks etc etc.l
Terrific article Greg, thank you
Regards
Alan

Thanks for a thought-provoking article Greg.
With respect to the reduction in agency spend reported by in-house teams one of our recruitment consultants pointed out that it’s not a reliable metric. Hiring managers very often turn to professional services firms when the in-house team doesn't deliver and, based on our experience, resources brought in this way aren't accounted for in either the employee headcount or staff cost – it would be interesting to see how the numbers stacked up if they were.
And my appreciation Greg - it’s great to see someone striking such a positive note.

Such a tremendous article Greg.
The numbers say our industry is growing and that is only metric worthy of our attention.
Companies must need us otherwise our industry would have gone the way of vinyl LPs, spinning wheels and dial-up modems years ago! We absolutely must evolve but no technology or internal HR team has managed to replace us yet.

Greg as always you make total sense, tech will help but it will not replace the human element. Recruiters all too often don't build their relationships with candidates ffor the long term they only focus on the now and the job they have to fill, they really need to work on the mid to long term its an edge they have over in-house teams.
In addition In-house can offer roles in their company a savvy recruiter should be getting them a choice something that in-house can do little about.

Must say that of the above that could have been a threat, all I ever saw as a proper threat was the growth of internal teams - comes down to the sector I am in financial services, they have all grown drastically. Bottom line is that if they had of got it right - internal teams or even the RPOs we would be in trouble as no need for an agency means no $$$ for the agency - we have to be needed. We are also seeing more and more RPO teams reaching out asking for help.
A business I recruited for in 2009 used to have 1 Recruitment Coordinator and an Administrator and the Recruiter would literally just negotiate T's and C's then give you the Exec Managers details so you can service - brilliant model, they used to absolutely get the cream of the crop candidates due to the very high level of collaboration and engagement from the business. They made the Recruitment Coordinator redundant in 2010, hired 4 Recruiters to do it internally - they struggled and just put a notch in the recruitment spend by hiring the easy stuff you can recruit on Seek. By 2012 they had hired 9 Recruiters and the business had been brought in line to no longer go to agency. The internal team failed tremendously - with their hands tied to head hunt properly / the lack of willingness to sell to candidates in person they were completely ineffective and went from being number one in their sector and the business the cream of the crop went to down to 3rd ranking and to be honest - the place that the duds from Seek ended up and across the industry people observed that the best talent was no longer going there. In 2014 they returned to agency relationships but in a demented form where they control everything meaning a Recruitment Agency has no contact with the business managers, does not get a proper brief and does not get to add value aside from finding a decent candidate - it may not be the best model but heck at least they are getting some good candidates again. They do however fail to see that Recruitment Agencies are an extension of their business and the lack of information they give us means we can not do as a good a job with attracting candidates.
That is one example, most large financial services are in similar situations and in the last 2 years we have seen a number of businesses opening up to agencies again after trying to shut the doors as much as possible. Recruiting into the FS industry now is however changed for good - You have to be on the PSAs whereas you used to be able get engagement easily n the past. Lots of players in my current niche have folded, lots of other agencies have tried to expand into the niche and have failed, lots of Recruiters have gone out on their own and have failed and staring up on your own used to pretty easy in this sector. All this failing is due to the PSAs and how strict they have become - It is just SO much more difficult.
In early days the growing internal teams only got the worst recruiters.... some of them are now managing those teams :) That has changed, over the last few years I have noticed a few good recruiters change over. The fact that a good agency recruiter earns at least double what any internal recruiter takes home has kept the best talent in agency... hard to dispute.
I have been dealing extensively with them since 2009, whereas prior to that not so much. My last observation of internal teams is that they are just too busy, they clearly have too much on their plates - they make silly mistakes, are constantly rushed, always busy, busy busy - too busy.... Ok, the problem is that when a recruiter has too much on they can not effectively perform the core of their job - finding the best possible candidate.... So when the projects, admin, meetings, blah, blah, blah take up an internal recruiters full time day they just don't have the time to direct source.
The big players also no longer have any foot in our niche, whereas pre-GFC they did, they used to fill the easy roles.

Hi Greg,
Such a great article ! Thanks for sharing.
In France, we have the same trend for 3 years now : in house recruiters are growing, with the goal of reducing recruitment agencies fees.
Other good point for us as Recruiters agency : we give great tips and advices to candidates to succeed in their clients interviews. We coach them and give them insights about the company's values, the manager, the skills required....
Candidates love that and you are right we must become Talent Agent.
It's always a pleasure to read your blog.
Cheers from Paris and from Evereden search
Anne laure LE HEBEL

Nice to read you Greg !
Yes it's going well, even if recently market is tough.But we are driving the business with strong digital skills, we even have created a PINTEREST Page for Evereden search to attract Creative Talents.Evereden search is starting it's 3rd year !
All the best from Paris
AL

An interesting read Greg.
I believe us Agency recruiters need to continue to get better at using the tools available to us to find good candidates. We all have our frustrations with in-house recruiters and having to work with them but we know that they are not always effective at filling jobs. They probably come into their own recruiting for higher volume, lower level roles where candidates are perhaps easier to come by but we will should generally be able to outshine them recruiting for those more senior, harder to find skills. Agency recruiters should definitely have the advantage over in-house recruiters if they continue to look to specialise in vertical sectors and / or particular skill sets / technology areas and “own” these areas of specialism.
In-house recruiters often have 40+ live requirements (and then some!) at any given time so they probably struggle to really drill down into searching and engaging with quality candidates whereas Agency recruiters should be able to dedicate more time to a specific search and come up with the candidates that in-house recruiters are not able to find. If we can keep filling jobs that in-house recruiters fail to fill then we will continue to show the value we can add to our clients.

Hello Greg,
I truly enjoyed your article. It provided amazing insights into current trends in recruitment, where the industry is headed and how recruiters can adapts to withstand challenges. As I aspiring recruiter I find that most helpful.
Would you have any advice on entering the industry and establishing a rewarding recruitment career?

Thanks for the encouraging and fortifying words Greg.
I totally agree that the best is yet to come but as you say, we must make extensive adjustments to make it work.
Our current CRM is old hat and somewhat retarded. If anyone is able to give me advice on a simplistic but effective system for an SME I'd greatly appreciate it.
Regards
Ray King

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GREG SAVAGE

With a career spanning four decades, Greg is a founder of 4 highly successful businesses, is a trusted advisor and respected voice across the global recruitment and professional services industries, and a regular keynote speaker at conferences around the world.